Hurricane Mitch and consumption growth of Nicaraguan agricultural households

Risk has been presented as a cause of poverty persistence under imperfect insurance mechanisms. This paper assesses the ex post effect of hurricane Mitch on consumption growth of Nicaraguan agricultural house-holds. How persistent was Mitch's direct impact beyond October 1998 damage? A nationally representative panel is available for 1998 and 2001, but affected households were also re-surveyed in 1999. Given the data design, idiosyncratic and common dimensions of the shock can be disentangled, together with its short and medium-term impacts. Satellite rainfall observations are interpolated at municipal centres to complement survey reports of hurricane-induced losses. Within the treated sample, micro-growth model estimates only point to a limited short-term negative impact of idiosyncratic damage, at most through floods and displacement. Mitch's medium-term common impact is considered in an experimental set-up. Households affected by Mitch do not suffer from lower growth between 1998 and 2001, even accounting for spatial heterogeneity. Overall, hurricane Mitch's direct consumption impact thus exhibits little persistence.